Exam 21: Cash and Inventory Management

Assuming that the firm can either hold cash paying no interest or invest in marketable securities,which of the following might induce the manager to hold higher cash balances?

Which of the following is true for a "repurchase agreement"?

How much time must be saved to justify a lock-box system that processes 350 cheques per day at an average amount of $400 per cheque if the system will cost $20,000 annually and interest rates average 8 percent?

The annual cash requirement for a firm is $1,000,000.The cost for each security transaction is $20 and current short-term return is 5 percent.Using Baumol's model estimate the initial cash balance.

Repos are long-term unsecured loan agreements.

What are the cost and benefits of holding cash?

Concentration banking allows the banks to use the local collection system to clear the customers' cheques.

The Canine Kennel uses 600 cases of dog food annually and orders 40 cases in each shipment.If the annual carrying cost per case (due to opportunity costs and extremely large dogs)is $5,what is the total annual carrying cost for dog food?

Which of the following statements is correct for a firm that currently has total costs of carrying and ordering inventory that is 50 percent higher than total carrying costs?

From the day a cheque is put in the mail,discuss the delays before it is credited or debited appropriately; e.g.,discuss the issue from the perspective of both payer and recipient.

What is the benefit for a firm with daily sales of $30,000 to be able to speed up collections by three days,assuming an 8 percent annual opportunity cost of funds?

What are the cost and benefit of holding inventories?

Which of the following represents a serious concern for those firms employing the Baumol model of cash management?

The economic order quantity:

A corporation has excess cash that does not appear to be needed for several months.How can they evaluate the differences between parking their funds in commercial paper versus repurchase agreements?

Discuss the distinction of playing the float versus cheque kiting.

A manager estimates that her firm benefits from an average float time of six days.Which of the following is true if the firm averages $15,000 per day in payments?

A lockbox service will benefit the following firm the most.

How many cases of microwave popcorn are sold annually by a firm which has total annual order costs of $32,000,orders in units of 100 cases,and is charged $90 per order in addition to the $72 per case product cost?

A firm's safety stock represents the: